Cable TV's Cord-Cutting Woes Deepen, Highlighting Divergence With Netflix
28 April 2018 - 4:05AM
Dow Jones News
By Shalini Ramachandran
Cable provider Charter Communications Inc.'s sour first-quarter
results delivered further evidence for Wall Street that stepped-up
cord-cutting and slower broadband customer growth are putting U.S.
telecommunications companies at a meaningful disadvantage to tech
giants like Netflix Inc.
The third-largest American pay-TV provider by subscribers said
it lost 122,000 video customers in the first quarter, a far worse
outcome than the roughly 40,000 subscriber losses Wall Street
analysts expected. In the year-earlier period, Charter lost 100,000
customers.
The results triggered an investor selloff, with Charter shares
down as much as 16% in late morning trading, the largest single-day
percentage decline since 2009. Shares recovered slightly and were
down 13% in early afternoon trading.
Charter's results follow similarly negative reports on
subscriber cord-cutting from its bigger rivals, Comcast Corp. and
AT&T Inc., this week. Comcast said Wednesday it lost cable TV
customers for the fourth-straight quarter due to heightened
competition from cheaper online TV services, and AT&T reported
video revenue declines as growth to its streaming service DirecTV
Now didn't offset higher-value satellite TV customer
defections.
The results have shaken investors' confidence that big telecom
companies' broadband customer growth will offset declines from
cord-cutting as time goes on. Charter reported Friday that its
broadband customer growth decelerated, echoing a similar trend at
Comcast and AT&T. Charter added 331,000 high-speed internet
customers, compared with an addition of 428,000 a year ago.
Investors are concerned that the troubling subscriber trends and
Comcast's recent bid for European pay-TV operator Sky PLC signal a
more fundamental problem: That American cable and telecom giants
don't have the assets and scale to hold their own against global
tech giants.
Netflix, which is a prime draw for cord-cutters and has been
expanding rapidly overseas, has been routinely beating Wall
Street's expectations for subscriber growth. Its already pricey
shares have soared 63% this year.
"Cable is currently out of favor, in large measure due to
Comcast's extracurricular activities," wrote veteran Wall Street
analyst Craig Moffett in a Friday research note.
The growing worries about cable and telecom firms have erased
chunks from the market values of Comcast, Charter and AT&T.
Since the beginning of February, Charter has lost more than $30
billion in market value, and AT&T has shed nearly $50 billion.
Comcast's market value has declined nearly $50 billion since late
January. Meanwhile, Netflix has gained more than $50 billion this
year.
Charter's results Friday weighed down other industry stocks.
Dish Network Corp. shares fell 3%, while Comcast and Liberty Global
PLC each fell 4%.
On a call with analysts Friday morning, Charter Chief Executive
Tom Rutledge said the company's optimistic vision for its future
growth hasn't changed. Charter executives continue to point to the
ongoing integration of Time Warner Cable and Bright House Networks,
both of which Charter bought in 2016, as a major source for much of
the weakness in subscriber results.
Mr. Rutledge said the integration has some "lumpy aspects to it
as we combine the companies in various ways," but he added "that
integration is actually going quite well and pretty much as
planned."
While subscriber results disappointed investors, Charter
increased earnings 8% to $168 million in the quarter, and overall
revenue grew 5% to $10.7 billion, helped by broadband revenue
growth, cable bill increases and ad revenue growth. Earnings per
share grew to 70 cents from 57 cents a year ago. Profit and revenue
fell short of Wall Street estimates of 98 cents a share on $10.8
billion in revenue, according to analysts polled by Thomson
Reuters.
(END) Dow Jones Newswires
April 27, 2018 13:50 ET (17:50 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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